PayPal to become publicly traded company, separate from eBay

Online auction giant eBay has announced plans to make its PayPal business a separate publicly traded company next year.

PayPal accounts for almost half of eBay’s income. 

The decision comes shortly after Apple Inc., which has 800 million user accounts through iTunes, threw down a gauntlet last month with the announcement of its own digital wallet Apple Pay. 

PayPal also has staked a claim in fast-growing mobile payment arena, and is expected to process 1 billion mobile payments this year, launching PayPal Here .The market is lucrative for whoever manages to dominate it: mobile payments are estimated to reach $58.4 billion by 2017 from just $1 billion last year. 

Apple Pay follows attempts by Google and startup Square to enter the mobile payment market. PayPal too has its own app. However few of the technologies have caught on with consumers, so far.

 “We are happy that eBay’s board and management have acted responsibly concerning the separation – perhaps a little later than they should have, but earlier than we expected,”  billionaire hedge fund investor Carl Icahn said on his website. In January, facing pressure from Icahn,  eBay chief executive John Donohoe had rejected a split from eBay. “We and our board believe the best way to drive long-term shareholder value is to keep eBay and PayPal together, to capitalize on the opportunities,” he told analysts, adding the “distraction and dis-synergies of separation would be happening exactly at the wrong time.”

This stance has now changed. “The industry landscape is changing, and each business faces different competitive opportunities and challenges,” Donahoe said in a news release.